Salvage experts from the Dutch Smit company contracted to try to save the 400,000dwt-capacity Vale Beijing ore carrier — two of whose ballast tanks developed cracks after 230,000 tonnes of ore had been loaded at the Ponta da Madeira terminal, in Maranhao state in December last year — plan to tow the vessel to a port in Turkey for definitive repairs, once emergency repairs have been carried out.
It is still not clear whether the accident was caused by faulty loading, metal fatigue, or a design fault.
Some bunkers leaked following the incident, but most of the 5,000 tonnes of fuel on board have since been removed from the vessel, which has been towed 6km from the terminal into deep water.
Terminal officials say there was a real risk of the vessel sinking while at the terminal itself, where strong tides mean the water is more turbulent than elsewhere in the bay. The ship’s pumps could not keep pace with the flow of water entering through two cracks each 60cm long, and 10cm wide.
Loading at the terminal was halted during the operation and 800,000 tonnes of ore could not be shipped as a result
A total of 50,000 tonnes of ore are to be shifted from the hold nearest the ballast tanks, to two holds further forward. The aim is to alter the balance of the vessel, so that the cracks can be repaired above the surface. The turbulent muddy waters in the area make underwater repairs extremely difficult.
The definitive repairs are expected to take between three and 12 months to complete.
The Vale Beijing was the fourth of 19 identical carriers being built in Chinese and South Korean yards to be delivered. The first, Vale Brazil, started operating in April last year. There have been no previous incidents involving the ships, which are almost 400 metres long and amongst the largest in the world.
The ships, ordered by Vale’s previous president Roger Agnelli in 2008 and 2009, when the cost of shipping ore to China, where almost 40% of the 310mt (million tonnes) of the ore shipped by Vale last year was sold, shot to $100 per tonne. This compared with the usual $20 per tonne and put Brazilian ore at a considerable disadvantage.
It takes 45 days for a consignment of ore to travel from Brazil to China, compared with the 10–15 days from Australia. To combat this,Vale decided to expand its own fleet, and build the largest possible vessels to do it.
Vale’s new president, Murilo Ferreira, has now decided to sell all the ships, 12 of them to be built in China, seven in South Korea, to companies who will charter them to Vale for 25 years. The Vale Beijing is operated by South Korea’s STX Pan Ocean company.
Until now, Chinese ship operators had refused to allow the new very large ore carriers to enter Chinese ports, alleging unfair competition. The ship carrying the first consignment destined for China had to turn back after passing the Cape of Good Hope and take the ore to Italy instead.
But the first large vessel, operated by the Singapore-based Berge Bulk company, was recently allowed to enter the port of Darien in China.
To overcome the access problem,Vale is building a 40mt- capacity entre-pot facility in Malaysia, to cost $1.5 billion.
Vale that anticipates 80% of all its ore will be sold to countries in Asia in a few years’ time, as demand from steel mills in Europe, the Middle East, and elsewhere stagnate, while that in China and other customers in Asia, continues to grow.
Vale, along with the other mining companies, has been forced to cut prices by about 10% from the peak of $180 per tonne in the middle of last year, as demand weakens.
The new formula for pricing, adopted only a couple of years ago, after the gap between long-term contracts and the spot price widened, forcing a new contract in which prices were altered according to the spot average of the previous three months, may be scrapped.
Vale has cut prices to some customers by up to 20%, following signs that the housing market in China, major destination for much of the steel made there, has slowed.
Vale has recently announced a two years delay in the start up of its new ‘Serra Sul’ mine in the Carajas complex. This new mine will eventually produce 90mt, but will not now start until 2016, rather than late next year.
Vale which has $23 billion of foreign debt, virtually all in US dollars, has been badly hit by the 13% fall in the value of the Brazilian currency, the Real, against the US$ in recent months.
Despite the slight fall in prices, the export of almost 320mt of ore earned Brazil almost $40 billion dollars last year, 14% — or $13 billion — more than in 2010.
Ore was responsible for a record 16.25% of the countries entire export earnings.
Vale itself produced 310mts of ore in 2011 and anticipates producing 320mt this year.
Ferreira says he is unhappy that less than 50% of all the ore consumed by Brazil’s 40mt-capacity steel industry is from Vale mines, compared with 70% a few years ago.
The high cost of Vale ore has encouraged most steel companies to open their own mines. Some have started exporting ore, which Vale says now costs about $50 a tonne to produce and transport to destinations, giving a very attractive
margin.
Patrick Knight